Summary financial information

Notes to the consolidated financial information

for the year ended 30 June 2017

 

1. General information

Impala Platinum Holdings Limited (Implats, Group or Company) is a primary producer of platinum and associated platinum group metals (PGMs). The Group has operations on the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe, the two most significant PGM-bearing ore bodies globally.

The Company has its listing on the securities exchange operated by JSE Limited in South Africa, the Frankfurt Stock Exchange (2022 US$ convertible bonds) and a level 1 American Depository Receipt programme in the United States of America.

The summarised consolidated financial information was approved for issue on 14 September 2017 by the board of directors.

2. Audit opinion

This summarised report is extracted from audited information, but is not itself audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the Company’s registered office and on the Company’s website.

The directors take full responsibility for the preparation of the summarised consolidated financial statements and that the financial information has been correctly extracted from the underlying annual financial statements.

3. Basis of preparation

The summarised consolidated financial statements for the year ended 30 June 2017 have been prepared in accordance with the JSE Limited Listings Requirements (Listings Requirements) and the requirements of the Companies Act, Act 71 of 2008 applicable to summarised financial statements. The Listings Requirements require financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and contain the information required by IAS 34 Interim Financial Reporting.

The summarised consolidated financial information should be read in conjunction with the consolidated financial statements for the year ended 30 June 2017, which have been prepared in accordance with IFRS.

The summarised consolidated financial information has been prepared under the historical cost convention except for certain financial assets, financial liabilities and derivative financial instruments which are measured at fair value and liabilities for cash-settled share-based payment arrangements which are measured using a binomial option model.

The summarised consolidated financial information is presented in South African rand, which is the Company’s functional currency.

4. Accounting policies

The principal accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS. The following new standards and amendments to standards have become effective or have been early adopted by the Group as from 1 July 2016 without any significant impact:

  • IFRS 2 – Share-based Payment
  • Amendments to IAS 40 – Investment Property
  • Improvements to IFRS Standards 2014-2016 Cycle
  • IFRIC 22 – Foreign Currency Transactions and Advance Consideration

5. Segment information

The Group distinguishes its segments between the different mining operations, refining services, chrome processing and a all other segment.

Management has determined the operating segments based on the business activities and management structure within the Group.

Capital expenditure comprises additions to property, plant and equipment (note 6).

Impala mining segment’s two largest sales customers amounted to 12% and 10% of total sales (June 2016: 10% each).

  30 June 2017   30 June 2016
  Revenue 
Rm 
Profit/(loss) 
after tax 
Rm 
  Revenue 
Rm 
Profit/(loss) 
after tax 
Rm 
 
Mining            
– Impala  14 604  (9 860)    14 556  (1 439)   
– Zimplats  7 038  576     6 753  144    
– Marula  1 616  (709)    1 678  (426)   
Impala Refining Services  21 711  1 292     20 539  1 454    
Impala Chrome  432  127     314  67    
All other segments  –  29     –  (10)   
Inter-segment revenue  (8 560) –     (7 908) –    
Total  36 841  (8 545)    35 932  (210)   
Share of profit of equity accounted entities     496        262    
Unrealised profit in stock consolidation adjustment     (51)       (48)   
Additional depreciation on assets carried at consolidation     (23)       (27)   
IRS pre-production realised on Group     42        –    
Net realisable value adjustment made on consolidation     (17)       (20)   
Total loss after tax     (8 098)       (43)   
  Capital 
expenditure 
Rm 
Total 
assets 
Rm 
  Capital 
expenditure 
Rm 
Total 
assets 
Rm 
 
Mining            
– Impala 2 472  35 696     2 490  45 607    
– Zimplats  864  18 353     981  19 358    
– Marula  113  2 582     89  2 507    
Impala Refining Services  –  8 402     –  6 824    
Impala Chrome  161     –  182    
All other segments  (16) 32 257     –  29 928    
Total  3 434  97 451     3 560  104 406    
Intercompany accounts eliminated     (26 279)       (23 354)   
Investment in equity-accounted entities     3 316        3 342    
Mining right accounted on consolidation     811        844    
IRS preproduction stock adjustment     (463)       –    
Unrealised profit in stock and NRV adjustment to inventory     (273)       (213)   
Impala segment bank overdraft taken to cash     (1 091)       –    
Other           (9)   
Total consolidated assets     73 481        85 016   

6. Property, plant and equipment

  30 June 
2017 
Rm 
  30 June 
2016 
Rm 
 
Opening net book amount  49 722     47 248    
Capital expenditure  3 434     3 560    
14 Shaft re-establishment  –     69    
Interest capitalised  –     29    
Disposals  (22)    (13)   
Depreciation (note 10) (3 702)    (3 319)   
Impairment  –     (257)   
Scrapping  –     (106)   
Transfer to investment property  –     (223)   
Rehabilitation adjustment  16     143    
Exchange adjustment on translation  (1 650)    2 591    
Closing net book amount  47 798     49 722   

Capital commitment
Capital expenditure approved at 30 June 2017 amounted to R7 billion (June 2016: R7.2 billion), of which R1.6 billion (June 2016: R1.3 billion) is already committed. This expenditure will be funded internally and, if necessary, from borrowings.

7. Derivative financial instrument

Asset Note   2017
Rm
  2016
Rm
 
Cross Currency Interest Rate Swap (CCIRS) (2018) 7.1     1 137  

7.1   Cross Currency Interest Rate Swap (CCIRS) (2018)
Implats entered into a CCIRS amounting to US$200 million to hedge the foreign exchange risk on the

US$ convertible bonds, being: exchange rate risk on the dollar interest payments and the risk of a future cash settlement of the bonds at a rand-dollar exchange rate weaker than R9.24/US$. US$200 million was swapped for R1 848 million on which Implats pays a fixed interest rate to Standard Bank of 5.94%. Implats receives the 1% coupon on the US$200 million on the same date which Implats pays-on externally to the bond holders. During June 2017, Implats cancelled the CCIRS and paid an amount of R1 839 million for the receipt of US$200 million.

No hedge accounting has been applied.

Liability Note   2017
Rm
  2016
Rm
 
Cross Currency Interest Rate Swap (CCIRS) (2022) 7.2   49    
Conversion option – US$ convertible bond (2022) 7.3   547    
Conversion option – ZAR convertible bond (2022) 7.4   637    
      1 233    

7.2   Cross Currency Interest Rate Swap (CCIRS) (2022)
Implats entered into a CCIRS amounting to $250 million to hedge the foreign exchange risk on the US$ convertible bond, being: exchange rate risk on the dollar interest payments and the risk of a future cash settlement of the bonds at a rand-dollar exchange rate weaker than R13.025/US$. US$250 million was swapped for R3 256 million on which Implats pays a fixed interest rate to Standard Bank of 9.8%. Implats receives the 3.25% coupon on the US$250 million on the same date which Implats pays-on externally to the bond holders and the interest thereon. In June 2022, Implats will receive $250 million for a payment of R3 256 million.

The CCIRS is carried at its fair value of R49 million. No hedge accounting has been applied.

7.3   Conversion option – US$ convertible bond (2022) (note 9.5)
The US$ bond holders have the option to convert the bonds to Implats shares (subject to shareholders’ approval) at a price of $3.89. The value of this conversion option was R559 million at initial recognition. The conversion option is carried at its fair value of R547 million, resulting in a R12 million profit for the period. At the general meeting held by shareholders’ on 24 July 2017, the approval to settle this option by means of Implats shares was obtained. Given this option is US$ denominated it does not meet the definition of equity (fixed number of shares for fixed amount) and will continue to be accounted for as a derivative financial instrument in future.

7.4   Conversion option – ZAR convertible bond (2022) (note 9.4)
The ZAR bond holders have the option to convert the bonds to Implats shares (subject to shareholders’ approval) at a price of R50.01. The value of this conversion option was R676 million at initial recognition. The conversion option is carried at its fair value of R637 million, resulting in a R39 million profit for the period. At the general meeting held by shareholders’ on 24 July 2017, the approval to settle this option by means of Implats shares was obtained. This option meets the definition of equity and will therefore be accounted within equity from 24 July 2017.

8. Inventories

  30 June
2017
Rm
  30 June
2016
Rm
 
Mining metal        
Refined metal 350   259  
In-process metal 2 977   2 523  
  3 327   2 782  
Non-mining metal        
Refined metal 993   1 267  
In-process metal 3 252   3 360  
  4 245   4 627  
         
Stores and materials inventories 735   793  
Total carrying amount 8 307   8 202  

The write-down to net realisable value comprises R78 million (2016: R106 million) for refined mining metal and R948 million (2016: R558 million) for in-process mining metal.

Included in refined metal is metal on lease to third parties of 36 000 ounces (2016: 36 000 ounces) ruthenium.

Quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of metal actually recovered (metallurgical balancing). The nature of this process inherently limits the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. Changes in engineering estimates of metal contained in-process resulted in an increase of in-process metal of R376 (2016: R384) million.

Non-mining metal consists mainly of inventory held by Impala Refining Services. No inventories are encumbered.

9. Borrowings

  Notes   30 June 
2017 
Rm 
  30 June 
2016 
Rm 
 
Standard Bank Limited – BEE partners Marula        889     882    
Standard Bank Limited – Zimplats term loan  9.1     1 111     1 248    
Standard Bank Limited – Zimplats revolving credit facility        314     353    
Convertible bonds – ZAR (2018) 9.2     303     2 575    
Convertible bonds – US$ (2018) 9.3     380     2 848    
Convertible bonds – ZAR (2022) 9.4     2 516     –    
Convertible bonds – US$ (2022) 9.5     2 609     –    
Finance leases        1 339     1 373    
         9 461     9 279    
Current        1 088     564    
Non-current        8 373     8 715    
Beginning of the year        9 279     8 076    
Proceeds        6 278     389    
Interest accrued        664     625    
Interest repayments        (533)    (492)   
Capital repayments        (4 593)    (13)   
Conversion option on 2022 Bonds        (1 156)    –    
Loss on settlement of 2018 Bonds           –    
Exchange adjustment        (486)    694    
End of the year        9 461     9 279   

9.1   Standard Bank Limited – Zimplats term loan
US $ denominated revolving credit facility of R1 111 (US$85) million bears interest at three-month London Interbank Offered Rate (LIBOR) plus 700 (2016: 700) basis points. During the year the facility was decreased from US$95 million to $85 million and the loan repayments were renegotiated. The facility will now be repaid in two equal annual payments commencing in December 2018. Previously it commenced in December 2017 with final maturity in December 2018. At the end of the period, the US dollar balance amounted to US$85 (2016: US$85) million.

9.2   Convertible bonds – ZAR (2018)
The ZAR denominated bonds have a par value of R2 672 million and carry a coupon of 5% (R133.6 million) per annum. The coupon is payable semi-annually for a period of five years ending 21 February 2018. The bond holder has the option to convert the bonds to Implats’ shares at a price of R214.90. The value of this compound instrument’s equity portion relating to conversion was R319 million (before tax) on issue. In May 2017, Implats made an offer to all bond holders to re-purchase their bonds at face value, which offer was conditional on the issue of the ZAR and US$ 2022 bonds. 89% of the bonds holders accepted the offer. This resulted in R79 million being accounted for within equity, being the deemed cost for 89% of the conversion option. The effective interest rate on the remaining balance of the bond is 8.5% (2016: 8.5%).

9.3   Convertible bonds – US$ (2018)
The US$ denominated bonds have a par value of US$200 million and carry a coupon of 1% (US$2 million) per annum. The coupon is payable semi-annually for a period of five years ending 21 February 2018. The bond holder has the option to convert the bonds to Implats’ shares at a price of US$24.13. The value of this conversion option derivative was R106 million at initial recognition. Implats also offered to re-purchase these bonds at face value and 85% of the bond holders accepted. The effective interest rate on the remaining balance of the bond is 3.1% (2016: 3.1%). (Refer note 9 for information regarding the CCIRS entered into to hedge foreign exchange risk on this bond.)

9.4   Convertible bonds – ZAR (2022) (note 7.1)
The ZAR denominated bonds have a par value of R3 250 million and carry a coupon of 6.375% (R207.2 million) per annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has the option to convert the bonds to Implats’ shares at a price of R50.01. The value of this conversion option derivative was R676 million on issue. Subsequent to year end, at the general meeting held by shareholders, shareholders approval to settle this option by means of Implats shares was obtained, which will result in the bond being accounted for as a compound instrument which will result in the derivative being transferred into equity. Implats has the option to call the bonds at par plus accrued interest at any time if the aggregate value of the underlying shares per bond for a specified period of time is 130% or more of the principal amount of that bond. The effective interest rate of the bond is 12.8%.

9.5   Convertible bonds – US$ (2022) (note 7.3)
The US $ denominated bonds have a par value of US$250 million and carry a coupon of 3.25% (US$8.1 million) per annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has the option to convert the bonds to Implats’ shares at a price of US$3.89. The value of this conversion option derivative was R559 million at initial recognition. Implats has the option to call the bonds at par plus accrued interest at any time if the aggregate value of the underlying shares per bond for a specified period of time is 130% or more of the principal amount of that bond. The effective interest rate is 8.38%. (Refer note 7 for additional information regarding the conversion option and the CCIRS entered into to hedge foreign exchange risk on this bond.)

Facilities
At 30 June 2017, the Group had signed committed facility agreements for a total of R4.0 (June 2016: R4.0) billion.

In addition, Zimplats has a US$34 (2016: $24) million revolving credit facility of which US$24 (June 2016: US$24) million was drawn at the end of the year.

10. Cost of sales

  30 June 
2017 
Rm 
  30 June 
2016 
Rm 
 
On-mine operations  16 341     15 173    
Processing operations  5 055     4 731    
Refining and selling  1 378     1 294    
Corporate cost  736     493    
Share-based compensation  88     21    
Chrome operation – cost of sales  186     196    
Depreciation of operating assets  3 702     3 319    
Metals purchased  10 030     10 663    
Change in metal inventories  (146)    38    
   37 370     35 928   

11. Impairment

  30 June
2017
Rm
  30 June
2016
Rm
 
Impairment of non-financial assets was made up of the following:        
Prepaid royalty 10 149    
Property, plant and equipment   257  
Investment property 80   50  
  10 229   307  

Refer to commentary on page 4 as well as the annual financial statements notes 3, 5 and 10 for more detail regarding the impairments.

12. Headline earnings

  30 June 
2017 
Rm 
  30 June 
2016 
Rm 
 
Headline earnings attributable to equity holders of the Company arise from operations as follows:        
Loss attributable to owners of the Company  (8 220)    (70)   
Remeasurement adjustments (after adjusting for non-controlling interest):             
Profit on disposal of property, plant and equipment  (24)    (29)   
Impairment  10 229     307    
Scrapping of property, plant and equipment  –     106    
Insurance compensation relating to scrapping of property, plant and equipment  (154)    (179)   
Total tax effects of adjustments  (2 814)    (52)   
Headline earnings  (983)    83    
Weighted average number of ordinary shares in issue for basic earnings per share (millions) 718.03     682.19    
Weighted average number of ordinary shares for diluted earnings per share (millions) 721.78     683.75    
Headline earnings per share (cents)            
Basic  (137)    12    
Diluted  (137)    12   

13. Contingent liabilities and guarantees

As at the end of June 2017 the Group had contingent liabilities in respect of guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise. The Group has issued guarantees of R118 (2016: R152) million. Guarantees of R1 396 (2016: R1 268) million have been issued by third parties and financial institutions on behalf of the Group consisting mainly of guarantees to the Department of Mineral Resources for R1 277 (2016: R 1 149) million.

14. Related party transactions

The Group entered into PGM purchase transactions of R3 745 million (June 2016: R3 693 million) with Two Rivers Platinum, an associate company, resulting in an amount payable of R1 034 million (June 2016: R958 million) at year end. It also received refining fees to the value of R32 million (June 2016: R30 million).

The Group previously entered into sale and leaseback transactions with Friedshelf, an associate company. At the end of the period, an amount of R1 215 million (June 2016: R1 232 million) was outstanding in terms of the lease liability. During the period, interest of R130 million (June 2016: R127 million) was charged and a R147 million (June 2016: R125 million) repayment was made. The finance leases have an effective interest rate of 10.2%.

The Group entered into PGM purchase transactions of R3 199 million (June 2016: R3 015 million) with Mimosa Investments, a joint venture, resulting in an amount payable of R844 million (June 2016: R800 million) at year end. It also received refining fees to the value of R317 million (June 2016: R291 million).

These transactions are entered into on an arm’s-length basis at prevailing market rates.
Key management compensation (fixed and variable):$ 30 June
2017
R000
  30 June
2016
R000
 
Non-executive directors’ remuneration 8 118   8 069  
Executive directors’ remuneration 37 432*   16 418  
Prescribed officers 46 500#   32 940  
Company secretary 2 804   2 006  
Total 94 854   59 433  
$ All the 30 June 2017 figures include the 2015 6% salary increase paid in deferred notional shares, the 2015 bonus paid in deferred notional shares as well as    the  2016 bonus paid in cash.
* Includes R10 million sign-on bonus paid to NJ Muller as well as a R7.7 million gain on retention and bonus shares sold by TP Goodlace.
# Includes R5.7 million for a separations package.

15. Financial Instruments

  30 June
2017
Rm
  30 June
2016
Rm
 
Financial assets – carrying amount        
Loans and receivables 9 943   8 740  
Financial instruments at fair value through profit and loss2   1 137  
Held-to-maturity financial assets 70   70  
Available-for-sale financial assets1 179   157  
Total financial assets 10 192   10 104  
Financial liabilities – carrying amount        
Financial liabilities at amortised cost 14 832   14 113  
Borrowings 9 461   9 279  
Commitments 74   66  
Trade payables 5 289   4 759  
Other payables 8   9  
Financial instruments at fair value through profit and loss2 1 233    
Total financial liabilities 16 065   14 113  

The carrying amount of financial assets and liabilities approximate their fair values.

1 Level 1 of the fair value hierarchy – Quoted prices in active markets for the same instrument.
2 Level 2 of the fair value hierarchy – Valuation techniques for which significant inputs are based on observable market data.